Extract from ABC News
Analysis
Donald Trump speaking after the US captured President Nicolás Maduro and wife Cilia Flores. (AP: Alex Brandon)
Why two thirds of Venezuela's oil may be missing
Even its much-vaunted proven reserves of 303 billion barrels — the world's biggest — is open to question.
Why? Because proven reserves are not static. They change constantly. That's because the definition is based upon the amount of oil that can be extracted economically using current technology.
So as the oil price shifts so too does the proven reserve. Higher prices make difficult-to-access resources a money making proposition. Lower prices have the opposite effect.
And that is where the problem lies.
Crude oil drips from a valve at an oil well operated by Venezuela's state oil company. (Reuters: Carlos Garcia Rawlins)
According to Adi Imsirovic, a lecturer in energy systems at Oxford University, the number bandied about as Venezuela's proven reserves date back to 2008 when the price of oil was fetching $US140 a barrel.
It's now under $US60 a barrel. That's partly because the US has ramped up production under Donald Trump's "drill baby drill" policy, which has lifted US oil and gas production and exploration.
On top of that, Venezuelan oil cops a $US25 discount, partly because of US sanctions but mostly because it is expensive to refine.
"All other things being equal, the current proven oil reserves may be well below 100 billion barrels — less than a third of the figure that's frequently cited," he says.
That's still a lot. But it's a lot less than first thought.
Oil demand forecast to slow, then crash
While oil is an essential ingredient in everything from foodstuffs to pharmaceuticals, its value primarily is determined by its demand as a fuel.
Overwhelmingly, it is used for transport, and according to the International Energy Agency more than 25 per cent of total oil demand is used to power privately owned cars and vans.
While some politicians dismiss the impact of emissions on climate change, a revolution is currently underway among the world's biggest automobile manufacturers.
Almost all have shifted production away from internal combustion engines to either pure battery powered vehicles or hybrids.
While the transition has been slower than expected, it is clearly underway, led by China, which ultimately will result in a drastic drop in demand for oil, creating an even bigger glut of oil.
A study by Bloomberg New Energy Finance argues that electric vehicles already have dented fuel demand but will slash demand for petrol by 2040.
That would send prices even lower, and potentially erode out much of what remains of Venezuela's proven reserves.
As this graph from the IEA shows, the role of fossil fuels is set to decline sharply after 2030.
The supply of fossil fuels is set to decline sharply after 2030. (Supplied: International Energy Agency)
Some in the Trump administration believe the shift towards artificial intelligence and data storage will spawn a massive lift in demand for energy that will not be met by renewables.
But even if that comes to pass, it's more likely that coal, and not oil, would be used to fill the breach.
Venezuela's economy, meanwhile, has been plundered by the Maduro regime, particularly its oil income.
During his reign, profits have been siphoned off, Maduro's wife has become extraordinarily rich and the country's oil infrastructure has been left to decay.
Almost all automobile manufacturers have shifted production to either pure battery-powered or hybrids vehicles. (ABC News: Brendan Esposito)
How long it would take to get back up to speed is an open debate.
Donald Trump reckons it could be done in a little over a year. Others say it could take a decade and cost huge amounts of money.
For an industry already oversupplied and with demand forecast to drop sharply, that's a mighty big risk.
The US president, on the other hand, may not be looking that far ahead. He's here for a good time, not a long time.
No comments:
Post a Comment